Citadel Securities is sole bidder for Credit Suisse's China venture

Citadel Securities LLC has made a non-binding offer for Credit Suisse’s securities venture in China, becoming the only global financial firm to submit a bid, people familiar with the matter said.

The US firm, founded by billionaire Ken Griffin, late last month put in a bid in the range of 1.5 billion yuan ($209 million) to 2 billion yuan, the people said, asking not to be identified because the matter is confidential. Credit Suisse, now owned by UBS Group AG, has been seeking around 2 billion yuan for the entire China unit, including the stake held by its local partner.

Warburg Pincus also looked at snapping up the operations, but decided against proceeding since it didn’t meet the set floor price, one of the people said. More than half a dozen potential buyers had expressed interest by conducting due diligence, and at least one Chinese firm has also made a bid, one of the people said.

Citadel Securities is going against the grain as it seeks to build a platform to bring its market-making capabilities to mainland China. Many global firms have tempered their ambitions to expand in the world’s second biggest economy because of growing geopolitical tension, a crackdown by China on data flows and the struggling economy.

Citadel Securities is planning for years of expansion, Chief Executive Officer Peng Zhao said in an interview in November. The firm hired BlackRock Inc.’s former China head Tony Tang in September to navigate the increasingly complex regulatory landscape.   

The venture needed to be offloaded after UBS took over its Swiss rival last year. UBS already controls a securities firm in China and can’t hold two licenses in the same businesses.

Before it collapsed in March last year, Credit Suisse had in 2022 offered to buy out the remaining 49% stake of its partner Founder Securities for 1.14 billion yuan, an agreement which was nixed after UBS’s takeover, the people said.

Spokespeople at UBS, Citadel and Warburg Pincus declined to comment. 

Selling the venture at the previously agreed valuation by the Chinese partner would be challenging as foreign investors keep backing away from the Chinese market amid persistent concerns. China’s onshore equity benchmark has slumped to its lowest in nearly five years this week in a dismal start into 2024. 

Credit Suisse Securities (China) has about 1 billion yuan of asset value, one of the people said.

In 2019, the bank agreed to pay 628.5 million yuan, or $89 million at the time, to increase its stake in Credit Suisse Founder Securities Ltd. to 51% from 33%. It received approval the following year to become majority shareholder in the venture but had yet to receive a greenlight to implement its onshore expansion after more than a two-years wait, further delayed by a senior management exodus in 2022.

The venture now mainly consists of investment banking and brokerage operations. The bank recently dismissed its entire wealth management team onshore as UBS decided not to take on the staff.